State Farm Mutual Automobile Insurance Company v. Donald McCauley and David McCauley

Citations: 921 F.2d 673; 1990 U.S. App. LEXIS 22183; 1990 WL 210459Docket: 90-3260

Court: Court of Appeals for the Sixth Circuit; December 26, 1990; Federal Appellate Court

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The United States Court of Appeals for the Sixth Circuit affirmed the district court's grant of summary judgment in favor of State Farm Mutual Automobile Insurance Company in its declaratory judgment action against Donald McCauley and David McCauley, administrators of the Estates of Roland L. McCauley and Burhma J. McCauley. State Farm sought a declaration of non-liability for claims asserted by Burhma J. McCauley's estate against Roland L. McCauley's estate, contending it had no duty to defend against these claims and that they were not covered under the insurance policy's bodily injury liability or uninsured motorist provisions.

The facts established that both Roland and Burhma McCauley died in a train accident while Roland was operating their vehicle. Following the accident, a claim was made against Roland's estate alleging negligence leading to Burhma's death. State Farm denied coverage under the bodily injury liability provision due to a "household exclusion" in the policy, which led to a direct claim under the uninsured motorist provision, also denied by State Farm.

State Farm's amended complaint requested a declaration that the household exclusion barred coverage for the wrongful death claim and that the uninsured motorist provisions excluded any claims made by Burhma's estate. Both parties moved for summary judgment, with the court ultimately siding with State Farm.

On December 1, 1989, the district court issued a memorandum denying the appellants' motion for summary judgment while granting State Farm's motion, thereby awarding the declaratory relief sought by State Farm. The court determined that the "household exclusion" in the State Farm policy applied to the survivors of Burhma J. McCauley and was not void for being against public policy. Furthermore, the court found that the policy's definition of an uninsured motor vehicle did not conflict with Ohio Revised Code section 3937.18 and was enforceable. As a result, summary judgment was entered, prompting a timely appeal.

The appellants focused their appeal on whether the Administrator of Burhma J. McCauley’s estate was entitled to coverage under the uninsured motorist provisions of the State Farm policy. Summary judgment can be granted if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law, a standard reviewed de novo. The appellants contended that the district court erred by allowing State Farm to improperly restrict the definition of an "uninsured motor vehicle" as per Ohio law. They argued that State Farm attempted to change the statutory definition, which they claimed was invalid and inappropriate.

Ohio Revised Code section 3937.18 requires offering uninsured and underinsured motorist coverage and defines an uninsured vehicle as one for which the liability insurer denies coverage. The appellants noted that this could imply the vehicle was uninsured due to the denial of liability coverage under the household exclusion. However, Ohio courts have indicated that the statute allows for some flexibility, recognizing insurers' rights to define uninsured automobiles in a manner consistent with the statute. The purpose of section 3937.18 is to protect insured motorists from the effects of accidents with uninsured drivers, but it is not intended to extend coverage to individuals in vehicles already insured under liability coverage.

Appellants reference Smith v. Heritage Mutual Insurance Co., which reached a contrary conclusion to Dairyland v. State Farm, without addressing Dairyland or its recognized policy. They argue that the insurance policy in question is distinguishable from Dairyland because it lacks a specific exclusion and instead redefines "uninsured motor vehicle," similar to Smith. However, Dairyland, as a Supreme Court of Ohio decision, is controlling. 

The Dairyland policy excluded vehicles owned by the insured or regularly used by them from being classified as uninsured, while the State Farm policy similarly stipulates that an uninsured motor vehicle excludes vehicles insured under its liability coverage or regularly used by the insured or their relatives. The court rejects the appellants' argument that this provision restricts the statutory definition of an uninsured motor vehicle, referencing Dairyland's determination that similar exclusions do not contradict the intent of Ohio's legislature as expressed in Ohio Revised Code section 3937.18. 

The Dairyland court reasoned that the exclusion was permissible since the vehicle involved was insured, and such exclusions fall within market practices unless specifically legislated against. It noted that the absence of prohibitive language in section 3937.18 allows insurers to limit coverage for family members to prevent collusion. Additionally, the court highlighted that its ruling aligns with the majority of jurisdictions addressing similar issues. 

In Fellouzis v. State Farm, the court reinforced that defining "uninsured motor vehicle" more narrowly does not negate the provision of uninsured motorist coverage as mandated by law. Consequently, the district court correctly determined that the McCauley vehicle was not classified as an "uninsured motor vehicle" under the State Farm policy, aligning with the legislative intent of Ohio's uninsured motorist statute.

The distinction between the policy provision in Dairyland, labeled as an exclusion, and the provision in this case, which defines an uninsured motor vehicle, is deemed insignificant by the court. The definitions provided by State Farm serve the same purpose as recognized in Dairyland, primarily to prevent collusive lawsuits. There is no opposing legislation, and the rationale used in Dairyland applies equally here. The policy language is clear and adequately informs the insured about the coverage. Consequently, the district court's rejection of the appellants' claim that the State Farm policy improperly narrowed the statutory definition of an "uninsured motor vehicle" was upheld, and the court granted summary judgment to State Farm. The judgment of the district court is affirmed, with a note that a similar case rejected the Smith ruling.